For many of you, financial freedom is a dream. It is a world where you have enough money to pay for your travel or do the things you want without worrying about monthly budgets or making ends meet. As you review your finances and prospects for future income, you fear that you will never be able to have enough to realise that dream. Financial freedom is more in the head than in reality. For some, merely not owing money to anyone is financial freedom. For others, it could be having enough by way of investment, rent or inheritance to pay for all monthly expenses. Those who are salaried probably dream of quitting their day job and working at their own pace by joining the gig economy. The idea is to use the free time to travel the world or start up something that is aligned with their dreams.
Your goal to live your life on your terms needs your help. That is perhaps the biggest block. At the same time, there is a lot of excitement about making money, but very few are inclined to learn new things. Conveniently, the blame is put on the poor income or the complexity of learning. The inertia stalls your progress more than the lack of money or knowledge.
A decade ago, it was easy to argue that gathering adequate financial knowledge was a struggle due to its unavailability. However, the world has undergone significant changes in terms of last-mile connectivity. You have access to an enormous pool of information. For example, there are so many YouTube creators who speak in regional languages and help people understand simple truths about money or personal finance. The creator economy is also hyperactive in complex financial products like derivatives. To add to that, technology is proving to be a bridge between financial knowledge ‘haves’ and financial knowledge ‘have-nots’. Modern large language models, such as GPTs, are transforming how you search for and understand information.
From a state of poor availability of information on personal finance, we have rapidly moved to a state of abundance.
The two extremes are not a desirable state for your financial life. If you struggle to figure out the relevance of the financial information for your well-being, the purpose of abundant information flow is meaningless. On the other hand, ‘not knowing something’ is not an excuse anymore for ‘not doing anything’.
Your road to freedom
The idea of being free of your routine and taking control of your time can be realised only if you choose knowledge over instant gratification. While it is easier said than done, it is not such a difficult idea. Over a phase of 12-15 years, you can completely transform your financial life by making the proper asset allocation. The knowledge will tell you that your ability to invest to hold on to those assets can lead to a significant windfall due to the power of compounding. Keeping track of asset prices will tell you that real estate and gold are not always good investments. Although the data indicates a surge in property prices, investing in them for rental income in India may not be a good idea. Prices are way too high, and rents are unable to keep up with those rising prices. At the same time, affordability is a key problem. Your income is not growing as fast as real estate prices in your city. In the case of gold, there are phases when prices stay stagnant for years. At the same time, an investment in gold does not lead to significant economic activity. Other than the price, it does not lead to anything productive. If you learn about effective asset allocation, you will understand that your financial freedom is more associated with your knowledge of equity and debt than with gold and real estate.